Cash sweeteners offered to entice retirement savers to transfer out of workplace final salary pensions are at a record high.
New research by financial consultancy Xafinity monitors how much companies are offering employees to leave their direct benefit pension schemes.
In October, the tracker hit a peak with an average transfer value of £243,000 – £2,000 more than the previous month.
The rise is put down to higher inflation since the Brexit vote in June.
The tracker calculates the fund transfer value of an inflation linked pension paying £10,000 a year to a 65-year-old who is currently aged 64.
Inflation will boost fund values
Xafinity’s Paul Darlow said: “We saw long-dated nominal gilt yields increase slightly over September which, all other things being equal, would have reduced transfer values.
“However the devaluation of Sterling since the Brexit vote is leading expectations of higher future inflation. Higher future inflation means that pensions will typically increase faster, meaning they are more valuable. Transfer values have therefore edged up marginally over the month.”
FTSE350 companies have struggled to plug massive pension fund deficits for years, only to see the gap between pension assets and payments owed to employees widen.
Companies have pumped billions into their pensions, but still owed the funds £711 billion in October 2016.
Savers are so disillusioned with final salary pensions that around a third of employees aged between 40 and 55 would consider a move to a personal pension, says a survey by financial firm MetLife.
Move to pension freedoms
The company explained savers are spurning guaranteed inflation-linked retirement incomes offered by workplace schemes in favour of those with pension freedoms.
MetLife UK wealth management director Simon Massey said: “The record high for final salary transfer values is tempting savers to give up the security of a guaranteed income for non-guaranteed options.
“Guaranteed income is absolutely vital to ensure that people can have a comfortable standard of living in retirement and final salary schemes, along with other solutions such as guaranteed drawdown, provide that certainty.”
Expats can transfer from a workplace pension to a Qualifying Recognised Overseas Pension Scheme (QROPS), which is an offshore pension that offers similar features and benefits to a UK SiPP.
Further QROPS Information and Guidance
For more information about QROPS and the benefits it provides, download the iExpats QROPS Guide or complete the Get Advice form.
